Hogg Robinson Buys N.Y. Corporate Agency

U.K.-based travel management goliath Hogg Robinson revealed it had acquired Sea Gate Travel Group just one week after announcing plans to sell off its non-travel related companies and focus on corporate travel. By adding New York-based Sea Gate Travel to its holdings in late April, Hogg Robinson surprised industry insiders who had expected it first to attempt to try to come to terms over single ownership of Business Travel International once Hogg Robinson was able to complete last year's accounting following the end of its fiscal year in March.

Hogg Robinson currently owns half of Business Travel International, along with partner BCD Holdings, the Dutch company that owns Atlanta-based mega agency WorldTravel BTI and travel industry technology provider TRX, as well as several European travel agencies.

Meanwhile, Sea Gate's core business—corporate travel with a market niche in sports and entertainment travel—ostensibly is in direct competition with that of WorldTravel BTI.

Hogg chief executive officer David Radcliffe did not deny that the two American travel management companies may find themselves competing for multinational bids. When asked whether Hogg-owned Business Travel International partners across the globe will work with Sea Gate or WorldTravel BTI, Radcliffe said, "It depends on what the client wants. If the client already has a relationship with BTI, then we will bid as BTI. Sea Gate will major in parts of the market where we don't operate as BTI."

Though WorldTravel BTI and Sea Gate both have stakes in the entertainment travel market, WorldTravel BTI president Danny Hood was optimistic about the potential relationship between the travel management companies.

"It can be a complementary relationship. We're both big in the entertainment industry but they have the sports travel. We'll look at that practically together," he said. "We're dealing with minimal channel conflicts today. Things are business as usual. There's more speculation going on than anything else, and all these discussions are ongoing."

Radcliffe would not comment on the strategic significance of the Sea Gate deal for a potential merger between the two halves of Business Travel International, but some industry insiders speculated that Radcliffe may be trying to reposition Hogg in the behind-the-scenes battle for Business Travel International ownership with Dutch billionaire and BCD chief executive John Fentener van Vlissingen. Some see Sea Gate as an alternative option in the United States for Hogg if it cannot wrest control of WorldTravel BTI. If the two Business Travel International owners can unify, they can fold in Sea Gate.

"It's almost as if Hogg is saying, 'We're going to get global in travel, and if BTI isn't going to let us acquire them, then we're going to start acquiring pieces of that by buying other agencies and ultimately we can dissolve our partnership with World Travel,' " according to one industry insider.

Others see it differently. "If you really wanted to read between the lines and start guessing at options, why would Hogg buy a regional travel agency, at best, in the United States if they didn't have designs on something else?" said David Hillman, principal and merger and acquisitions specialist at for Illinois-based consultancy Consulting Strategies. "There's got to be something about what Hogg was looking for that made Sea Gate particularly attractive, probably at a premium price."

Still, Hood remained firm in his assurance that discussions to merge ownership of Business Travel International are still very much on the table. "One BTI does simplify things, like global contracting, it simplifies governance. That door's still open and discussions are still ongoing," he said. "Both parties continue to be motivated to put together one BTI."

Radcliffe refused to comment on any speculation other than to say, "I have some sympathy with the argument that if we can't find a way ahead with WorldTravel, then this is a good insurance policy. That's not the reason we bought Sea Gate, but I understand it."

Tracing its origins back to 1928, the current Sea Gate Travel Group was formed in 1999, following the merger of MacPherson Travel and Sea Gate Travel. It expanded again in 2002 with the amalgamation of Advanced Travel Management and has strong East and West coast coverage in banking, media, sports and entertainment.

Sea Gate CEO Dan Green described the acquisition as a relatively short process, which occurred because the timing seemed right and both parties were motivated to close the deal.

"You can do the deal a year too early or a year too late, and there's a lot less penalty to doing it a year too early," he said. As for the potential channel conflict among Hogg's U.S. partners, Green said that Sea Gate has "no involvement with WorldTravel. Whatever Hogg Robinson does, we'll be a part of it. If there's a role for me, great. If not, well, that's business."

Green will stay on with Sea Gate as the company's CEO, developing its global sports and air charter management programs, while Tom Gleason—industry veteran and former regional vice president of passenger sales for American Airlines' Eastern division—will join the agency as chief operating officer, and continue building its corporate travel management business, as Sea Gate announced late last month.

Prior to its acquisition, Sea Gate was a member of global agency network Synergi Travel. Preceding the sale in the fall of 2004, Synergi took on Boston-based Garber Travel as a second U.S. partner, a departure from its long-held business strategy of maintaining a single agency affiliate in each network-represented country.

"They had the intuition that their former agency was going to be leaving them. During the selection process, I said, 'I want to be on the board, I want to be shareholder, but I also want to be the exclusive U.S. member,' " said Roz Garber, president, CEO and general manager of Garber Travel. "They were just waiting to see what would happen."

Though Synergi president and CEO Greg O'Neil would not comment on whether the network agreed to Garber's terms with the understanding that Sea Gate's departure was imminent, he said that the group had long known there was an opportunity for Sea Gate to move forward with the sale.

"In reality, having two agencies in the U.S. market was more difficult than beneficial for us. Historically, Synergi had always pursued a strategy of only having one network member in each major market," he said. With the Sea Gate acquisition complete and Garber now serving as the company's sole U.S. partner, said O'Neil, "We definitely are sticking to that strategy. For now, it's the Sea Gate and WorldTravel BTI customers who will be most confused about how it's going to play out."

The lack of direct explanation surrounding Hogg's bold move into the American market has, indeed, left many corporate customers questioning their travel management company relationships.

"The British have fired a shot around the world and I don't get it," said Phil Dunphy, veteran travel buyer and director of global travel services at Pfizer Inc. "We're entering into a global contract with Business Travel International. I've watched this company grow since it's inception and I do not understand this at all. We're all still waiting for answers from both WorldTravel and Hogg Robinson to understand how this affects the overall Business Travel International association. We go into relationships and believe in long term relationships, but right now, we're kind of like, okay guys, what are you doing? This move really has cast a shadow of doubt over the relationship between Hogg Robinson and WorldTravel BTI, and caused us to wonder, what is their motivation?"